Chip-and-Pin Card Standards Move Forward

Credit unions and other debit card issuers moved significantly closer to being able to issue smart chip embedded debit cards this week when a key industry council announced its members reached agreement on a key software approach.

The announcement came from the Secure Remote Payment Council, which announced that the 10 debit network members of its Chip and PIN Workgroup have agreed to adopt a common software approach and work with Discover Financial Services to license it for use by all debit card issuers.

The new approach will help solve the problem of how to have debit cards that both have smart chips embedded in them and which allow merchants to easily route debit transactions on any one of the 18 possible different competing debit processing networks.

Under regulations flowing from the Durbin Amendment to the most recent financial reform laws, credit unions and other debit issuers are supposed to provide the ability for their debit cards to process debit transactions on at least two unaffiliated networks, but the current smart chip standard used in the rest of the world only allows for one.

The inability to provide that faculty on debit cards had held up the issuing of smart chip-enabled debit cards and CO-OP Financial Services, one of the key organizations working to resolve the problem, this week advised credit unions to still hold off issuing smart chip enabled debit cards a while longer.

“Adoption of this common U.S. debit AID (application identification) and application is extremely important to credit unions because it preserves their routing and network choices in connection with the emerging EMV standard,” said Stan Hollen, CEO of CO-OP Financial Services in Rancho Cucamonga, Calif.

“While this solution simplifies efforts for the industry, commercialization will take time,” Hollen said.

“Given that EMV is being driven by liability shifts, not regulatory or network mandates, we recommend that issuers wait until 2014 before moving forward with their business case for EMV deployment in order to ensure that the market is ready,” Hollen said.